5. Effects of New Accounting Standards

Amendments to IAS 7 Disclosure Initiative

In January 2016, the IASB published amendments to IAS 7 Statement of Cash Flows, which aim to provide better information about borrowing. Adoption into EU law was announced in Commission Regulation (EU) 2017/1990 on 6 November 2017. These amendments should be taken into account for financial years which begin on or after 1 January 2017. This has no substantial impact on HHLA’s Consolidated Financial Statements.

Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses

The IASB published amendments to IAS 12 in January 2016. The amendments clarify how deferred tax assets for unrealised losses should be recognised in relation to debt instruments measured at fair value. If changes in market interest rates lead to write-downs to market value, this in turn leads to the formation of temporary differences, even though the losses are not realised. The amendments were enacted in EU law with Commission Regulation (EU) 2017/1989 on 6 November 2017. These amendments should be taken into account for financial years which begin on or after 1 January 2017. They had no impact on HHLA’s Consolidated Financial Statements.

Improvements to IFRS 2014–2016 Cycle

The 2014–2016 annual round of improvements to IFRS was published by the IASB in December 2016. Three standards are affected in total.

The amendments to IFRS 12 Investment Entities clarify that the regulations contained in the standard also apply to interests covered by IFRS 5. The amendments were enacted in EU law with Commission Regulation (EU) 2018/182 on 7 February 2018. The effective date is 1 January 2017. The amendments had no effect on the present Consolidated Financial Statements.

Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions

The IASB published amendments to IFRS 2 Share-based Payment in June 2016. The amendments relate to the inclusion of vesting conditions in the measurement of cash-settled share-based payment transactions and amendments relating to the classification of share-based payments that provide for net settlement for taxes to be withheld. The standard also deals with the accounting treatment of the amendments. The amendments were adopted into EU law with Commission Regulation (EU) 2018/289 on 26 February 2018. These amendments apply to financial years beginning on or after 1 January 2018. Early adoption is permitted. Adoption is not expected to have any impact on the Consolidated Financial Statements.

IFRS 9 Financial Instruments

IFRS 9 Financial Instruments was finalised by the IASB in July 2014. This standard aims to simplify the requirements for reporting financial instruments in the balance sheet. In the future, financial assets will be classified based on criteria relating to the business model and the associated cash flows. Due to the new provisions on impairment, losses expected in the future will be recognised earlier in profit and loss in some cases. The amendments were enacted in EU law with Commission Regulation (EU) 2016/2067 on 22 November 2016. Adoption is expected to be mandatory for financial years which begin on or after 1 January 2018. Early adoption is permitted. In accordance with the transition guidance, the Group will not adjust the prior-year figures and will report the transition effects on a cumulative basis in revenue reserves. The main financial assets reported by the Group include cash, cash equivalents, trade receivables and receivables from related parties (public-sector companies). Cash and cash equivalents are generally only invested with counterparties with very good credit ratings. The actual default risk associated with these investments is very low, see Note 47. The new impairment model does not have any material impact on the financial assets. As far as the trade receivables are concerned, the Group was not exposed to any material default risk extending beyond the impairment allowances set up in the 2017 financial year, see Note 47. As things stand at present, the Group expects to see stable development in the future, too. It does not expect to see any significant increase in risk provisions based on the amended impairment model.

IFRS 15 Revenue from Contracts with Customers

The IASB adopted the standard IFRS 15 Revenue from Contracts with Customers in May 2014. This stipulates the amount and timing of revenue reporting and what information must be disclosed. It replaces the existing guidelines on revenue recognition, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. The EU enacted this standard in its legislation with Commission Regulation (EU) 2016/1905 dated 22 September 2016. Adoption is mandatory for financial years which begin on or after 1 January 2018. The Group will apply the standard for the first time by recognising the cumulative adjustment amounts from the initial application of the standard at the time of initial application. This involves recognising the cumulative effect of the adjustment to the value in the opening balance sheet in equity. The Group does not expect any material changes in revenue from contracts with customers compared to the previous application of IAS 18.

Amendments to IFRS 15 Clarifications

The final amendments to IFRS 15 were published by the IASB in April 2016. For the most part, the amendments to this standard are clarifications and additional simplifications for the transition to IFRS 15. The amendments were enacted in EU law with Commission Regulation (EU) 2017/1987 on 31 October 2017. The effective date is 1 January 2018.

IFRS 16 Leases

The IASB published IFRS 16 Leases in January 2016. This standard supersedes the previously valid IAS 17 Leases and introduces significant accounting changes for lessees. In general, all leases are now to be recognised as rights of use for accounting purposes. Under IFRS 16, lessors will continue to classify leases as operating or finance in line with IAS 17. The new rules aim to help improve the transparency of financial reporting and break down existing information imbalances. The EU enacted this standard in its legislation with Commission Regulation (EU) 2017/1986 dated 31 October 2017. The effective date is 1 January 2019. Earlier adoption is permitted if IFRS 15 Revenue from Contracts with Customers is already applied. The Group will apply the standard for the financial year starting on 1 January 2019. The Group has not yet made a decision on the application of the transition guidance.

Based on its obligations from operating leases where it is a lessee – see Note 45 – all other things being equal, the Group expects the balance sheet total to increase significantly compared with the existing accounting due to the new regulations set out in IFRS 16. The increase in the balance sheet total will be prompted by capitalising the right of use of the asset on the liabilities side via the recognition of a corresponding liability. The income statement will be affected by splitting the leasing expenses into principal and interest.

Improvements to IFRS 2014–2016 Cycle

The 2014–2016 annual round of improvements to IFRS was published by the IASB in December 2016. Three standards are affected in total.

Temporary provisions were deleted from IFRS 1 First-time Adoption of International Financial Reporting Standards.

The amendment to IAS 28 Investments in Associates and Joint Ventures clarifies that a different valuation option can be used for each interest in a joint venture or an associated company. The amendments were enacted in EU law with Commission Regulation (EU) 2018/182 on 7 February 2018. IFRS 1 and IAS 28 become applicable on 1 January 2018.

HHLA does not anticipate any effects for the Consolidated Financial Statements.

Amendments to IAS 19 Plan Amendment, Curtailment or Settlement

In accordance with IAS 19, pension obligations are to be measured based on updated assumptions in the event of plan amendment, curtailment or settlement. This amendment clarifies that, after such an event, the past service cost and net interest for the remainder of the period must be taken into account based on updated assumptions.

The amendments are to be applied with effect from 1 January 2019. Early adoption is permitted.

Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures

The aim of the amendments, which were published in October 2017, is to clarify that an entity must apply IFRS 9 Financial Instruments to all long-term interests in an associate or joint venture, irrespective of the accounting method. The amendments take effect for reporting periods that begin on or after 1 January 2019. Early adoption is permitted.

Amendments to IAS 40 Transfers of Investment Property

The IASB published amendments to IAS 40 Investment Property in December 2016. The amendments clarify transfers of investment property to or from the portfolio in the case of a change of use. They are expected to be applicable for financial years which begin on or after 1 January 2018. Earlier adoption is permitted, provided they are first enacted in EU legislation. HHLA will examine their effect on the Consolidated Financial Statements.

Amendments to IFRS 9 Prepayment Features with Negative Compensation

The IASB published these amendments to IFRS 9 in October 2017. They are designed to facilitate measurement at amortised cost/at fair value through other comprehensive income even for financial assets that do not meet the SPPI criterion. These relate to financial assets with prepayment features that involves one party receiving or paying appropriate compensation in the event of termination (appropriate negative fee). The amendments are to apply to financial years which begin on or after 1 January 2019.

Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The IASB approved amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures in September 2014. These clarify how unrealised gains from transactions between an investor and a joint venture or an associate should be reported. The EFRAG announced in February 2015 that the process of endorsing these amendments had been suspended for the time being because inconsistencies had been identified between the amended standard and the existing IAS 28. The effective date – previously 1 January 2016 – has been postponed indefinitely until the inconsistencies have been resolved.

IFRIC 22 Foreign Currency Transactions and Advance Consideration

In December 2016, the IASB published its interpretation IFRIC 22 clarifying at what point in time the exchange rate should be established for translating foreign currency transactions containing incoming or outgoing payments on account. IFRIC 22 is applicable as of 1 January 2018. Early adoption is permitted. The impact on HHLA’s Consolidated Financial Statements is being examined.

IFRIC 23 Accounting for Uncertainties in Income Taxes

The interpretation published in June 2017 clarifies the accounting treatment of uncertainties relating to income tax treatment under IAS 12. The interpretation is to be applied to taxable profit (tax loss), unused tax losses, unused tax credits and tax rates. The provisions will come into force for financial years starting on 1 January 2019. Early adoption is permitted.

Improvements to IFRS 2015–2017 Cycle

These clarifications were published in December 2017 and apply to four standards.

Based on the amendments to IFRS 3 Business Combinations, the principles governing successive business combinations are to be applied when an entity obtains control over a business operation in which it previously held an interest as part of a joint operation.

Based on the amendments to IFRS 11 Joint Arrangements, a company does not remeasure its previously held interest in a joint operation when it obtains joint control of the business.

The amendments to IAS 12 Income Taxes deal with the income tax consequences of dividend payments.

The amendments to IAS 23 Borrowing Costs clarify that, in connection with the calculation of the capitalisation rate, the cost associated with debt taken out specifically in connection with the acquisition of the qualifying assets is not to be included until the asset is completed if a company has generally borrowed funds to purchase qualifying assets.

The amendments are to be applied with effect from 1 January 2019. Early adoption is permitted.

Amendments to IFRS 4

Insurance Contracts

IFRS 17

Insurance Contracts